The World Gold Council's Q1 2024 "Global Gold Demand Trends Report" indicates that the total global gold demand (including over-the-counter transactions) for the first quarter grew by 3% year-on-year to 1,238 tons, marking the strongest first-quarter demand performance since 2016.

Robust investment demand from the over-the-counter market, continuous gold purchases by global central banks, and increasing demand from Asian buyers collectively drove the average gold price in the first quarter to a historical high of $2,070 per ounce. This price is 10% higher than the same period last year and increased by 5% compared to the previous quarter.

Global Central Banks Maintain a Rapid Pace of Gold Purchases

The report states that in the first quarter, global central banks continued to maintain a rapid pace of gold purchases, with global official gold reserves increasing by 290 tons this quarter, setting a new historical high for quarterly gold purchases.

Wang Lixin, CEO of the World Gold Council's China region, stated at the report's release that the repeated record highs in gold prices have not hindered the pace of central bank reserve diversification.

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He analyzed that the original intention of central bank reserve management needs to meet three major elements: safety, liquidity, and return. Moreover, the "importance order of the above three elements is not adjustable, with safety first, liquidity second, and central banks value the medium to long-term return rate of gold." Wang Lixin added.

In the first quarter, global investment in gold bars and coins grew by 3% year-on-year to 312.3 tons, remaining flat quarter-on-quarter.

Global gold ETFs continued to experience outflows, with total holdings decreasing by 114 tons. At the end of the first quarter, there was a positive shift in ETF funds in the US market. Meanwhile, inflow volumes of funds in the Chinese market led Asia.

Against the backdrop of soaring gold prices, global gold jewelry demand remained resilient, with only a 2% year-on-year decrease to 479 tons. The increase in gold jewelry demand in the Asian region offset the decline in demand in Europe and North America.

Furthermore, driven by the artificial intelligence boom in the electronics industry, global technology gold demand rebounded by 10% year-on-year to 79 tons.In terms of gold supply, mine production increased by 4% year-on-year to 893 tons, setting a record high for the highest quarterly output since the inception of the statistics. As some investors took profits, the total amount of recycled gold in the first quarter also reached a new high since the third quarter of 2020, increasing by 12% year-on-year to 351 tons.

Demand Diversifies Amid High Gold Price Volatility

The report states that in the first quarter of 2024, the overall domestic gold demand in China reached 343 tons, a 3% increase year-on-year, exceeding the ten-year average by more than 25%.

Among this, domestic gold jewelry consumption was 184 tons, a slight decrease of 6% year-on-year. Meanwhile, gold bars and coins became the main engine supporting the growth in demand, increasing significantly by 68% year-on-year to 110 tons.

Wang Lixin analyzed that, seasonally, January to February are the traditional peak sales seasons for domestic gold jewelry, while March to mid-April are the off-season. The sharp rise in gold prices in March had a certain impact on consumer demand and led to merchants being more cautious with inventory, focusing mainly on consuming existing stock. "Although sales volume has fallen, the total consumption amount has still increased due to the rise in gold prices," he added.

In the first quarter, Chinese gold ETFs also performed well, with total holdings increasing by 5.5 tons, contrasting with a decline of 1 ton in the same period last year; the People's Bank of China's gold purchase announcements have continued for 17 months, with a cumulative purchase of 27 tons in the first quarter. Domestic industrial gold demand remained stable at 16 tons.

Data from the World Gold Council shows that in the first quarter, Chinese gold ETF holdings increased by 6 tons, and as of April, they have surged by 24 tons, setting a new record for monthly holdings growth, with the total holdings breaking through 90 tons.

Jia Shuchang, Head of Research for China at the World Gold Council, analyzed that, unlike overseas ETFs which are mainly driven by institutional investors, current domestic retail investors are more significantly driven by the rise in gold prices and the performance of other mainstream assets, while "the heat of Baidu Index also (attracts investors) to follow." He added.

Wang Lixin stated that looking forward to the next few quarters, domestic gold retail investment demand may still maintain a healthy level. To support the economy, expand domestic demand, and boost confidence, the domestic prudent monetary policy may lead to further interest rate reductions. Against the backdrop of declining local opportunity costs, the attractiveness of gold is expected to increase. Secondly, as the record-breaking pace of global central bank gold purchases continues to attract attention, retail investors' interest in gold may also remain high. In addition, the weakness in the real estate market, potential fluctuations in the RMB exchange rate, and the possibility of increased global geopolitical tensions will also benefit the growth of gold retail investment demand.